In this article, we will take a look at the 5 most undervalued growth stocks to buy according to analysts. To see more such companies, go directly to 15 Most Undervalued Growth Stocks To Buy According To Analysts.
5. Applied Industrial Technologies Inc. (NYSE:AIT)
Number of Hedge Fund Holders: 29
Average Analyst Price Estimate: $164.33
Applied Industrial Technologies Inc. (NYSE:AIT) makes industrial motion, power, control, and automation technology solutions. In April Applied Industrial Technologies Inc. (NYSE:AIT) posted its fiscal third quarter results, according to which its adjusted EPS came in at $2.38 beating estimates by $0.23. Revenue in the quarter jumped 12.2% year over year to reach $1.1 billion, missing estimates by $20 million. EDITDA was up 29.2% YoY.
Applied Industrial Technologies Inc. (NYSE:AIT) also increased its sales growth and EPS forecasts for 2023.
4. Darling Ingredients Inc. (NYSE:DAR)
Number of Hedge Fund Holders: 29
Average Analyst Price Estimate: $90.14
Food ingredients company Darling Ingredients Inc. (NYSE:DAR) saw a 30% growth in revenue during the first quarter. Its GAAP EPS in the period came in at $1.14, beating estimates by $0.14.
Darling Ingredients Inc. (NYSE:DAR)’s one-year average analyst price target is $90.14, which shows a huge upside potential from its May 22 levels ($65).
SouthernSun Small Cap Strategy made the following comment about Darling Ingredients Inc. (NYSE:DAR) in its Q1 2023 investor letter:
“Darling Ingredients Inc. (NYSE:DAR), was a top detractor for the quarter. A global leader in renewable energy and sustainable food and feed ingredients, DAR delivered strong year-end results with a record $1.541 billion in EBITDA despite margin pressure from the company’s recent acquisition of Valley Proteins and fires at two rendering facilities. The company ambitiously acquired three companies in 2022, Op de Beeck in Belgium, Valley Proteins in the U.S. and FASA Group in Brazil. Darling just completed its announced acquisition of Gelnex on 3/31/2023, and are on track to complete the announced acquisition of Miropasz by the third quarter of this year. Darling has furthermore deployed capital at its Diamond Green Diesel facility in Port Arthur, Texas, increasing renewable diesel production to 1.2 billion gallons per year. These investments have unsurprisingly increased the company’s debt ratio to slightly over 3x, but have also further strengthened Darling’s vertical supply chain integration and market presence to an impressive degree. Finally, the company announced in late January that DGD will invest $315 million in a Sustainable Aviation Fuel (SAF) project at the Port Arthur plant. Upon completion in 2025, the plant will have the capability to upgrade 50% of its current 470 million gallon annual production capacity to SAF. In a global market seeking to decarbonize, Darling addresses this critical need while processing 1 out of every 7 animals into food ingredients, feed ingredients and renewable energy. We continue to be impressed with management’s ability as well as their track record to capitalize on opportunities and enhance optionality to ultimately drive value over the long term.”
3. Copa Holdings, S.A. (NYSE:CPA)
Number of Hedge Fund Holders: 33
Average Analyst Price Estimate: $140.31
Panama-based airliner Copa Holdings, S.A. (NYSE:CPA) ranks 3rd in our list of the most undervalued growth stocks to buy according to analysts. Earlier in May Copa Holdings, S.A. (NYSE:CPA) posted spectacular first quarter results. Adjusted EPS in the quarter came in at $3.99, beating estimates by $0.74. Revenue in the period jumped 51.7% year over year to $867.3 million, beating estimates by $27.94 million. Passenger traffic saw an increase of 7.1% in the quarter when compared to the first quarter of 2019.
2. Interactive Brokers Group, Inc. (NASDAQ:IBKR)
Number of Hedge Fund Holders: 44
Average Analyst Price Estimate: $109
According to Yahoo Finance, the 12-month average analyst price target for financial services company Interactive Brokers Group, Inc. (NASDAQ:IBKR) is $109. Interactive Brokers Group, Inc. (NASDAQ:IBKR) was trading at around $75.70 as of May 22. This shows that Interactive Brokers Group, Inc. (NASDAQ:IBKR) has a huge upside potential.
During the first quarter, Interactive Brokers Group, Inc. (NASDAQ:IBKR)’s adjusted EPS came in at $1.35, missing estimates by $0.06. Revenue in the quarter jumped a whopping 64.3% year over year to $1.06 billion.
As of the end of the first quarter of 2023, the biggest hedge fund stakeholder of Interactive Brokers Group, Inc. (NASDAQ:IBKR) was William B. Gray’s Orbis Investment Management which owns a $591 million stake in the company.
Heartland Mid Cap Value Fund made the following comment about Interactive Brokers Group, Inc. (NASDAQ:IBKR) in its Q1 2023 investor letter:
“Financials. Unlike the broader financial sector, which sank in the quarter, Interactive Brokers Group, Inc. (NASDAQ:IBKR), a fully digital brokerage platform, gained 14.24% in the first three months of the year.
Interactive Brokers’ differentiated business model shined because the company’s management team built the business to avoid the two risks that came to the forefront for sector peers this quarter, credit and interest-rate risk. IBKR is a prime example of why analyzing businesses under multiple scenarios, both good and bad, is so important. In late 2021, when we began purchasing IBKR, the market was not pricing credit or interest-rate risk into the sector. Banks appeared optically “cheap” on P/E multiples, but after adjusting for downside risks, the upside versus downside potential was far more compelling in Interactive Brokers than in banks. Today that gap has narrowed, however, we continue to hold a position in IBKR given its lack of credit risk, which has yet to be fully priced into many banks.
IBKR enjoys industry- and sector-leading pre-tax margins thanks to its highly automated platform that drives scale efficiencies, which are partially passed on to customers in the form of attractive interest rates on cash balances. For this reason, clients have little incentive to move deposits as interest rates rise. IBKR’s management team has refused to take duration risk thereby significantly lowering the chances of a “run on the bank” scenario that proved disastrous for several banks this year. Credit risk is limited to margin loans that are over-collateralized and marked to market in real time thereby significantly reducing any loss given default.”
1. Elevance Health, Inc. (NYSE:ELV)
Number of Hedge Fund Holders: 81
Average Analyst Price Estimate: $573
Recently, Morgan Stanley upgraded Elevance Health, Inc. (NYSE:ELV) to Overweight from In Line. The firm highlighted Elevance Health, Inc. (NYSE:ELV)’s acquisition of BioPlus.
During the first quarter of 2023 Elevance Health, Inc. (NYSE:ELV)’s adjusted EPS came in at $9.46, beating estimates by $0.17. Revenue jumped 10.6% year over year to $41.89 billion, surpassing analyst estimates by $960 million.
The biggest hedge fund stakeholder of Elevance Health, Inc. (NYSE:ELV) as of the end of March 2023 was Viking Global of Andreas Halvorsen which had a $991 million stake in the company.
Baron Health Care Fund made the following comment about Elevance Health, Inc. (NYSE:ELV) in its Q1 2023 investor letter:
“Elevance Health, Inc. (NYSE:ELV) is a leading health benefits company in the U.S., serving more than 45 million members through its affiliated health plans under the Blue Cross/Blue Shield brand in 14 states. Shares fell along with those of other managed care companies on investor concerns over proposed lower 2024 Medicare Advantage (MA) rates and changes in risk assessment methodology. We believe Elevance has multiple growth drivers, including its MA business, its in-house pharmacy benefit management business, and its Diversified Business Group, which includes behavioral health, advanced analytics, and complex and chronic care services. Near term, medical cost trends remain low, Elevance has pricing power, and earnings should benefit from rising interest rates. Over the long term, management targets 12% to 15% annual EPS growth. We think Elevance is a high-quality growth company trading at a reasonable valuation.”
You can also take a peek at 10 Most Profitable Small Businesses in 2023 and 10 Best April Dividend Stocks To Buy.
